SVODs are hot, but subscribers are still fickle: survey

As the Big Three look to differentiate themselves in a competitive market, small players are honing their skills to win over American audiences.

You might think the generation that regards traditional television with something approaching open disdain would be unwavering in their loyal to the SVODs and OTTs that stream their beloved content anytime and anywhere they want it.

But that’s not neccesarily so, according to a new study from Dallas-based research firm Parks Associates. The U.S. survey found that 20% of U.S. broadband households (approximately 90 million homes) cancelled at least one OTT or SVOD subscription in 2015.

That doesn’t mean subscription in general isn’t strong — 64% of households surveyed had an SVOD subscription at years-end, up from 59% in 2014. But results suggest that customers are still shopping around and experimenting with SVODs, particularly niche services such as Crunchyroll, FloSports, AcornTV, Seeso and DramaFever.

Brett Sappington, senior director of research at Parks and Associates, presented the data at the ongoing National Association of Broadcasters (NAB) marketplace in Las Vegas on April 18. Here are some of the highlights of the report:

How the major players stack up

As expected, Netflix still leads in terms of subscriptions — 52% of U.S. broadband households were subscribed to the SVOD at year-end 2015. Just five per cent of households had cancelled Netflix in the past 12 months (that includes those who cancelled at the end of Netflix’s free, one-month trial), which accounted for 9% of Netflix’s U.S. subscriber base.

Competitor Amazon, to which 24% of respondents were signed up, saw a 19% subscription drop in 2015. That could be attributed to Amazon’s subscription model which, up until this past week, was available only as an add-on to Amazon’s Prime service, which provides enhanced e-commerce features such as free two-day shipping and access to special product lines for an annual fee of $99. Earliter this month, however, Amazon announced that it will unbundle the VOD service from Prime, allowing users to subscribe for $8.99 per month.

The unbundling move could prove beneficial to the service as most of those surveyed for the Parks’ study said they subscribed to Prime mainly for the video features.

The most drastic churn was found in Hulu. The service ended the year with 14% of U.S. households holding a subscription. At the same time, 7% of broadband subscribers dropped Hulu at some point in the year.

All three SVODs have begun to differentiate themselves from one another in terms of content and strategy; Netflix has by far the largest slate of originals, with 600 hours of originals that have either already premiered or set to premiere in 2016. It’s also the most aggressive in terms of international expansion, streaming in 190 countries to Amazon’s five. Hulu is still U.S.-only.

Amazon, meanwhile, boasts fewer originals, though its scripted productions such as Mozart in the Jungle and Transparent have been lauded by critics and fans alike. Its library is the largest of the three, with more than 20,000 titles, according to the company. A recent report by Business Insiderfound that Amazon carried more than 18,000 film titles, compared to Hulu’s 6,000 and Netflix’s 4,000.

As the old saying goes: there’s riches in niches. And a number of niche-focused SVODs have launched in the space over the past year hoping to prove that adage true.

Parks’ research, however, suggests there may be challenges ahead in wooing subscribers.

In total, the study found there were 101 SVOD and OTT services available in the U.S. as of March 2016 (with 33 being added in the past year alone). But, removing Netflix, Amazon and Hulu from the equation, only 5% of U.S. broadband households subscribed to one or more of the 98 remaining options. Three per cent of total households surveyed cancelled their subscriptions to one of those “other” services last year.

“On a service by service basis, the smaller OTT video services have a relatively high churn, particularly relative to Netflix and Amazon… In some instances, consumers are experimenting with new services, trying a new service and cancelling before the trial period ends or within a few months,” said Sappington at his presentation.

He added that many people only sign up for services to follow popular, tentpole programming, such as a premiere or a finale of a popular show like HBO’s Game of Thrones or WWE’s Wrestlemania.

“There is a risk that consumers will unsubscribe once they’ve watched these popular items. Ongoing perceived value, in the long run, is the biggest driver to churn. Services have to continue to provide users with validation of value and a reason to return,” he said.

Sappington said that those who cancelled their subscription to smaller OTT services were often critical of the service’s interfaces, discoverability and features.